Planning for Your Financial Future: From 401(k)s to Life Insurance

Tuesday, June 26, 2018, 6:00 PM | Leave Comment

Are you prepared for retirement, or will you be working into your 70s and 80s? If you don’t start planning for your financial future today, your retirement years could be much less comfortable than you hope.

Whether you’re 30 or 50, here’s what you need to know to get on track.

Planning for Your Financial Future
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  • Saving for Retirement

    If you want to maintain your lifestyle in retirement, your retirement savings combined with Social Security should replace 70 to 90 percent of your pre-retirement income. Don’t expect Social Security alone to cut it: In 2018, the average monthly Social Security payment is $1,404, which equates to an annual income of only $16,848. Because Social Security reserves are projected to be depleted after 2034, payments may decrease rather than rising to meet the cost of living.

    The best way to save for retirement is to put money into an employer-sponsored 401(k) with a match on your contributions. By investing the maximum that your employer will match, you make the most of free money.

    If you don’t have an employer-sponsored 401(k) or you’d like to save beyond your employer’s match limit, open an IRA. With a Roth IRA, you save post-tax income and don’t owe taxes on withdrawals in retirement. A traditional IRA uses pre-tax income that’s subject to taxation upon withdrawal.

    A traditional IRA makes sense if you expect your retirement income to be lower than your current income. Fidelity Investments’ retirement contribution calculator helps you determine what percentage of your income you should contribute to retirement savings based on your age and income.

  • Buying and Selling Life Insurance

    Not everyone needs life insurance. However, if you have a spouse or dependent children who financially rely on you, life insurance is an essential benefit to protect your family in the event of your death.

    The rule of thumb for life insurance is to purchase coverage for 10 times your yearly income. However, it’s not necessarily that simple. You should also take into account outstanding debts like mortgages and credit card debt, as well as medical bills if your death is preceded by extended hospitalization.

    Paying for a life insurance policy may become unnecessary in retirement. If you have adequate retirement savings to support your spouse and no longer have dependent children, a life settlement is an option. By selling a life insurance policy through a life settlement, you receive a higher payout than the policy’s cash surrender value and decrease financial obligations in retirement by eliminating premium payments.

  • Planning for Long-Term Care

    Don’t fall victim to the misconception that Medicare will pay for your long-term care. While Medicare may pay for short-term stays in a long-term care hospital or skilled nursing facility, it doesn’t cover long-term care needs such as residence in an assisted living facility or in-home care.

    According to, a person turning 65 today has a nearly 70 percent chance of requiring long-term care at some point in their remaining years. Twenty percent will need long-term care for more than five years. When the median annual cost for assisted living or in-home care is over $40,000 (and nearly twice as high for nursing homes), it’s clear how long-term care needs can financially devastate a person’s retirement.

    If you’re not prepared to pay for long-term care out of pocket, long-term care insurance is critical. And the earlier you purchase coverage, the better off you’ll be. Individuals who purchase long-term care insurance before the age of 65 and before developing serious health conditions lock in significantly lower premiums than people who wait to buy long-term care insurance. If you develop health problems before purchasing a policy, you risk being denied coverage.

No one enjoys thinking about growing old, falling ill, or passing away prematurely. But if you don’t attend to these financial considerations today, you’re setting yourself up for a financial struggle later on. If you want a comfortable retirement that protects you and your family, it’s time to start putting these financial protections into place.

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